GBP/USD Price Forecast: Cable plummets to fresh seven-month lows ahead of BoE decision

Trading at 1.30244, a level last seen in early April, GBP/USD has fallen 0.87% in today’s session alone.

Continuing a period of bearish momentum, cable is now on pace for its worst two-weekly performance since November 2024, with four days to spare until the candle closes.

Recently breaking through previously held support and the 200-day SMA, one has to ask:

What’s next for GBP/USD?

• With today’s session signifying the worst GBP/USD performance in over 140 calendar days, price action has convincingly broken previously held support at 1.31403, and the 200-day SMA at 1.31011
  
• Writing ahead of the Bank of England’s Thursday decision, Governor Andrew Bailey is in a difficult position, faced with rising inflation, which would support higher rates, alongside rising unemployment and weak economic growth, which would support lower rates
  
  
• Otherwise, and with the dust beginning to settle on last week’s Federal Reserve rate decision, a hawkish tone from Powell to suggest a shallower easing cycle has added a significant tailwind to falling cable pricing

Read Kelvin’s coverage on AUD/USD: AUD/USD: Found support again at 0.6515, what’s next as RBA looms

It would only make sense that, considering monetary policy matters scheduled for later this week, much of the market has the pound sterling in its focus.

It is fair to say, however, that this newfound focus comes at an inopportune time for GBP/USD, between warnings of “hard choices” in the upcoming Autumn budget by Chancellor Rachel Reeves, and a central bank stuck between a rock and a hard place in their upcoming decision.

As a result, GBP currently underperforms its currency peers by some margin.

"It is my job to deal with the world as we find it, not the world that I might wish it to be"

Rachel Reeves, Chancellor of the Exchequer, speaking at Number 10 Downing Street, 04/11/2025

Fiscal health of UK remains in question: At risk of repeating myself from previous coverage, questions around sovereign debt and government borrowing costs continue to reign supreme in GBP/USD markets.

Speaking today at Number 10 in a rare pre-budget speech, Rachel Reeves addressed speculation about her upcoming Autumn budget, tasked with plugging an estimated £22bn hole in public finances, compounded by falling UK productivity.

Rachel Reeves fails to rule out breaking manifesto pledges on tax in major speech

For those less interested in the latest from Rachel Reeves, I can save you eighteen minutes:

Blaming previous governments, Reeves crucially did not rule out rises to income tax, national insurance, or VAT, despite campaign pledges not to raise taxes on working people

Tying this back to GBP/USD, the current narrative surrounding sovereign debt in the UK is weighing harshly on sterling, and despite somewhat questionable government spending in the US, markets are voting with their feet and selling the British pound in favour of other, seemingly more stable stores of wealth.

Read more on UK public finances: GBP/USD Price Forecast: Cable to test 5-month lows of 1.31400 as fiscal worries worsen

Increased rate cut bets ahead of BoE meeting: To be clear, the majority of markets still predict that the Bank of England will vote to maintain rates at 4.00% in its decision later this week.

Although when considering October’s CPI numbers reported inflation unchanged MoM at 3.8%, and that unemployment and GDP data still leaves much to be desired, it would be wrong not to acknowledge a school of thought to cut rates by 25 basis points.

In the unlikely event that the Bank of England does choose to cut, however, we can expect this to weigh heavily on sterling pricing in two ways:

1. In a vacuum, lower interest rates are currency negative
2. Within the context that a cut would surprise markets, and considering current sovereign debt, jobs market, and GDP data, the cut would likely be seen as an emergency response by the BoE, hurting investor confidence

Although it is a firmly minority view, it would be fair to say that rate cut bets are increasing somewhat ahead of Thursday, which is adding to the cable downside.

Bringing this discussion back to earth, inflation remains almost twice the target in the UK, at 3.8%, which would make rate cuts hard to justify unless Governor Bailey can reasonably suggest that current inflation is in some way temporary and will resolve itself.

I’m pleased to say both price targets set in my previous commentary have been met, with GBP/USD sliding lower as predicted.

Failing to find support at the 200-day SMA or the triple bottom-lows as highlighted, bearish momentum continued, and for now, looks set to continue.

• Price target/Resistance #1 - $1.30000 - Key psychological level
• Price target/Resistance #2 - $1.28847 - Lower boundary of previous range

While it seems remiss to suggest any evidence of GBP bulls after today, price action may stage some kind of recovery at each price target/area of resistance, especially considering the 14-day RSI rates current price action as ‘oversold’ for the first time since January.

Read yesterday’s coverage on the precious metal markets: Gold (XAU/USD) Price Forecast: Bullion buoyant above $4,000, now looks for support ahead of ADP payrolls